Tanzania: Shilling seen stable against US dollar

The increased inflows of agricultural
export proceeds continued to contribute significantly to the
strengthening of the shilling.

Also the increased tourism earnings
during this season is playing vital role to the stability of the local
currency against the world major currencies.

According to the Ministry of Natural
Resources and Tourism which directly employs 500,000 people, accounts
for 25 per cent of Tanzania’s total foreign exchange earnings.

The Bank of Tanzania (BoT) figures for
May this year shows that earnings from tourism which is the major
sources of foreign earnings rose by 10.6 per cent to 2.16 billion US
dollars in the year to May 2015, from 1.95 billion US dollars as visitor
arrivals increased.

Similarly exports earnings from goods
and services increased by 9.8 percent to 9,454.5 million US dollars in
the year ending May 2015 from the corresponding period last year. The
improvement was driven by an increase in export value of coffee and
cashew nut.

Export value of cashew nut improved significantly owing to an increase in export volume and price.

Another government boost received that
strengthened the shilling is the 200 million US dollars from China
Development Bank, in addition to 100 million US dollars from the World
Bank and 77 million US dollars from African Development Bank.

According to the NMB Bank e-market
report the shilling strengthened further on the back of strengthening
dollar inflows from agriculture, institutions and reduced demand as
tight liquidity stance continues.

The market traded with high volatility to close at 1990/2090 levels.

Towards the end of last week, the local
currency traded flat against the dollar on a thin trading session as
traders squared their positions ahead of the weekend. Market closed at
1993/2093 levels.

During this period, dry money markets
continued as overnight rates trades at highs of 30 per cent and lows of
22 per cent with expectations to ease in the near future as maturities
from government securities and month end flows enters the market.